Hilton Grand Vacations prices to cap $5.1 billion primary week, bonds rise; new EP Energy busy

By Paul Deckelman and Paul A. Harris

New York, Nov. 18 – Timeshare vacation company Hilton Grand Vacations Inc. priced a $300 million issue of eight-year notes on Friday as a regularly scheduled forward calendar offering, high-yield syndicate sources said.

It was the day’s sole pricing of U.S. dollar-denominated and fully junk-rated paper and represented something of a slowdown from Thursday, when $500 million of new high-yield paper had come to market, albeit also in only one tranche.

The day’s activity raised the amount of new junk paper from domestic or industrialized-country borrowers this week to $5.16 billion in nine tranches, according to data compiled by Prospect News – a clear improvement over last week’s sleepy pre-holiday activity levels.

When the new Hilton Grand Vacations deal hit the aftermarket, traders saw the bonds firming smartly, although on only modest volume.

The traders meantime saw Thursday’s new deal from oil and natural gas operator EP Energy LLC topping Junkbondland’s Most Actives list although with little real movement away from its par issue price.

They also saw considerable trading volume in the recent new deals from Canadian transportation equipment manufacturer Bombardier, Inc. and oilfield services provider Weatherford International plc.

Wednesday’s new offering from hospital operator Tenet Healthcare Corp. continued its strong secondary market showing.

Apart from the issues which have already priced, primary market players were expecting possible pricings on Friday from high-tech issuers Genesys Telecommunications Laboratories, Inc. and Conduent Inc., but now say that these deals will be floated off into the upcoming pre-Thanksgiving holiday week.

Statistical market performance measures were trending lower on Friday, after having been higher on Thursday and mixed on Wednesday. It was the second weaker session in the past five trading days

Hilton Grand inside talk

Hilton Grand Vacations priced a $300 million issue of eight-year senior notes (Ba3/BB) at par to yield 6 1/8% on Friday.

The yield printed 12.5 bps below the tight end of the 6¼% to 6½% yield talk. Initial guidance was in the mid-6% area.

Goldman Sachs, BofA Merrill Lynch, Deutsche Bank, Barclays, J.P. Morgan, SunTrust and Wells Fargo were the joint bookrunners.

The deal came in conjunction with Hilton Worldwide Holdings Inc.’s spinoff of its timeshare division, Hilton Grand Vacations.

Genesys talk 10% to 10¼%

Genesys Telecommunications Laboratories talked its $700 million offering of eight-year senior notes (Caa2/CCC) to yield 10% to 10¼% on Friday.

That talk widened substantially from early guidance in the low 9% area, sources said.

There were no updates to the timing of the deal which is in the market via left bookrunner Goldman Sachs.

The roadshow was scheduled to conclude on Friday. Pricing was possible Friday business, an investor said. However no deal terms were available at press time.

Genesys also hiked pricing on its dollar- and euro-denominated covenant-light term loans to Libor/Euribor plus 525 basis points from a spread of 475 bps to 500 bps on Friday.

Also expected to price Friday was Conduent’s $750 million offering of eight-year notes (expected ratings B2/B+), the deal backing Xerox Corp.’s spinoff of its business process services division.

In the course of the past week Conduent’s price guidance moved higher. By Wednesday afternoon the prospective issuer was eyeing a 9%-plus print, after coming with early guidance of 7¾% to 8%, sources said.

As of late Friday, no official price talk or deal terms had surfaced.

The week ahead

With Conduent and Genesys carrying over, the upcoming pre-Thanksgiving week features a modest active deal calendar.

There is a dollar-denominated two-part offering from Macau’s Studio City, the amount of which remained to be determined on Friday.

The hotel and entertainment company plans to sell senior secured notes (B1/BB-) maturing in 2019 and 2021 via joint bookrunners Deutsche Bank, BofA Merrill Lynch, ANZ and Bank of China.

Proceeds will be used to pay off Hong Kong dollar-denominated bank debt.

The deal has one foot planted in emerging markets, an investor said on Friday.

Right now it’s a challenging calendar featuring off-the-run issuers with situations and uses of proceeds that demand more credit work than investors might ordinarily be inclined to devote, the portfolio manager remarked.

The run-up to 2017

There is a deal pipeline – a modest one in Europe and a somewhat more substantial one in the United States – that awaits friendlier market conditions than those that have thus far prevailed in the wake of the U.S. elections, sources say.

“There is stuff in the pipeline that is being pushed,” a syndicate banker said on Friday, adding that the late stretches of 2016 don’t look all that welcoming.

There could be announcements in the three-session week ahead, a week foreshortened by the extended Thanksgiving holiday weekend in the United States. If anything new turns up it would likely do so on Monday, pending market conditions, the banker said.

During the final week of November, the Bank of America Merrill Lynch 2016 Leveraged Finance Conference will command a significant measure of the market’s attention, the source added.

The late-November OPEC meeting and the mid-December Federal Reserve meetings are looming, the official said, noting that the market is bracing for the impact of an increase in the Fed Funds rate.

Add to that uncertainties surrounding the pending transition of Donald J. Trump into the U.S. presidency and uncertainties about Brexit, and the run-up to 2017 does not appear especially inviting to prospective high-yield issuers, the banker remarked.

Flat Thursday flows

Cash flows for dedicated high-yield funds were flat on Thursday, the most recent session for which data was available at press time, a portfolio manager said.

High-yield ETFs saw $6 million of inflows on the day.

Actively managed funds sustained $10 million of outflows on Thursday.

Those daily flow numbers follow a report released Thursday afternoon by Lipper US Fund Flows that the junk bond funds sustained $2.28 billion of outflows during the week to last Wednesday’s close.

Against of a backdrop of outflows from high-yield bond funds, cash flows for dedicated bank loan funds remain robust, the portfolio manager said, adding that the loan funds saw $230 million of daily inflows on Thursday.

Strong pickup on the week

Friday’s one new deal brought the amount of new U.S. dollar-denominated and fully junk-rated paper from domestic or industrialized-country borrowers to $5.16 billion in nine tranches for the week, according to data compiled by Prospect News.

That was well up from just $500 million in a single tranche which had gotten done the previous week, ended Thursday Nov. 10. Last week was a day shorter than usual, with the market closed on Friday, Nov. 11 in observance of the Veterans Day holiday in the United States.

This week’s total was slightly off from the $5.30 billion which had priced in 10 tranches the week before, ended Nov. 4.

This week’s primary activity pushed the year-to-date issuance total up to $203.20 billion in 313 tranches.

That was running 19.8% behind the new-deal pace seen at this time last year, when $253.36 billion had priced in 392 tranches by this point on the calendar, the Prospect News data indicated.

That was only a little narrower than the 20.5% gap between this year’s and last year’s issuance which had been seen last week.

Grand trading in new Hilton deal

Traders saw the new Hilton Grand Vacations 6 1/8% notes due 2024 “trading well,” when they hit the aftermarket, as one of them put it, although another noted the limited volume in the new deal – he estimated it at around $9 million.

He saw the bonds moving around in a 100¼ to 101½ bid range versus their par issue price.

Another trader pegged the new deal at 101 3/8 bid, while two other traders at separate desks each located the new issue around 101 bid, 101½ offered.

New EP Energy tops Actives

Among other recently priced issues, traders saw the new EP Energy 8% senior secured notes due 2024 as easily the busiest issue of the day in the junk precincts, with over $63 million having changed hands.

But the Houston-based oil and natural gas exploration and production company’s issue was seen not too far off from the par level at which that $500 million regularly scheduled forward calendar issue had priced on Thursday after upsizing from $350 million originally.

One trader noted that the bonds had actually gotten as good as 100 7/8 bid when they initially went into the aftermarket on Thursday but said that they had lost most of that edge on Friday and were finishing at 100 1/16 bid.

A second had the notes in a 99 7/8-to-100 1/8 bid range, while a third called them between 99 7/8 and 100¾.

Bombardier stays busy

Among other recently priced issues, Bombardier’s 8¾% notes due 2021 “were not doing well,” a trader said, seeing the Montreal-based aircraft and railroad equipment manufacturer’s paper having dipped down to 97¼ bid, 98 offered, although he later saw the bonds between 97 5/8 and 98.

“It was like a bomb,” a second trader said, quoted the deal in a 97¾ to 98¼ bid neighborhood on around $25 million of volume.

Bombardier had priced $1.4 billion of those notes at 99.001 on Wednesday, yielding 9%, in a regular forward calendar deal.

Tenet trading strongly

In contrast, Wednesday’s offering from Tenet Healthcare continued to trade very well on Friday, with the traders seeing the Dallas-based hospital operator’s bonds having edged up to around the 104 bid level from Thursday’s close north of 103 bid.

Tenet priced $750 million of those 7½% senior secured second-lien notes due January 2022 at par in a quick-to-market offering; they quickly firmed to around the 103 bid level in initial aftermarket dealings and then gradually added to those gains on Thursday and again on Friday.

Weatherford stays up there

Weatherford International’s 9 7/8% senior notes due February 2024 continued to trade north of 101 bid on Friday, although one trader said “they were off their highs” of around 102 bid.

One market source saw them at 101¼ bid, calling that down ¾ point on the day, with over $15 million changing hands.

The oilfield services company had brought its quickly shopped deal to market at par on Tuesday.

Indicators turn weaker

Statistical market performance measures were trending lower on Friday, after having been higher on Thursday and mixed on Wednesday. It was the second weaker session in the past five trading days.

They were also seen unchanged to off from the levels they hit at the end of last week, after having been mixed week over week previously.

It was the indicators’ third negative week in the last four.

The KDP High Yield Index dropped by 5 basis points on Friday to close at 69.91, its first loss after three straight gains, including Thursday’s 7 bps improvement.

The index’s yield rose by 2 bps to 5.91%, versus Thursday’s 3 bps tightening.

Those levels compared unfavorably with the 70.31 index reading and 5.73% yield seen at the close last Thursday, Nov. 10. The index was not published last Friday due to the market close for the Veterans Day holiday.

The Markit Series 27 CDX Index was down nearly 3/16 point on Friday, going home at 103 9/16 bid, 103 19/32 offered, versus Thursday’s nearly 1/8 point rebound from a 7/32 point loss seen on Wednesday.

The index was unchanged on the week from its level last Friday, when the index was published despite the holiday market close.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.